Bonds can be thought of as an “IOU” with a contractually defined series of cash flows which the issuer promises to pay in the defined currency. The terms of a bond cannot be changed after issuance, without the agreement of the bondholders. The principal amount, or par value of a bond is the face value on which interest is paid in the form of a coupon. In most cases, the principal value is equal to the redemption value, which is the amount that is paid back to the bondholder at maturity. Usually bonds are only available with a certain minimum denomination, i.e. a minimum principal value. The most common denomination for corporate bonds is $1,000 but the face value for government issued debt could vary. So what types of bonds are there? What types of credit risk should I be aware of? How liquid are bonds? Find out in this edition of The 10 Spot!